GREENWOOD LAND COMPANY v. OMNICARE, INC.

Filing
46

REPORT AND RECOMMENDATION that 42 MOTION to Dismiss Count II and III of Amended Complaint filed by OMNICARE, INC., NCS HEALTHCARE OF NEW YORK, INC. be granted. Objections to R&R due by 3/11/2010. Signed by Magistrate Judge Amy Reynolds Hay on 2/22/2010. (dgg)

IN THE UNITED STATES DISTRICT COURT F O R THE WESTERN DISTRICT OF PENNSYLVANIA
G R E E N W O O D LAND COMPANY, P l a i n t if f v s. OMNICARE, INC.; NCS HEALTHCARE O F NEW YORK, INC., D efen d a n ts
) ) ) ) ) ) ) )
Civil Action No. 09-686 Judge David Stewart Cercone/ Magistrate Judge Amy Reynolds Hay
R E P O R T AND RECOMMENDATION I. R E C O M M E N D A T IO N
T h e Amended Complaint (Doc. 3) in this diversity matter filed by Greenwood Land C o m p an y ("Greenwood") comprises three counts - the first for breach of a commercial lease, the seco n d alleging negligence based on failure to maintain and repair the leased premises, and the th ird for punitive damages. The Defendants, Omnicare, Inc. ("Omnicare") and NCS Healthcare of N ew York, Inc. ("NCS"), have filed a Motion to Dismiss Counts II and III of the Amended C o m p lain t, contending that Count II is barred by Pennsylvania's "gist of the action" doctrine and th at, in the absence of a viable negligence claim, the Count III claim for punitive damages must be d ism issed as well. It is respectfully recommended that the Defendants' Motion (Doc. 42) be g r a n te d . II. REPORT A. B a ck g ro u n d
In 1994, Greenwood, as landlord of commercial property located in Sharon, Pennsylvania, en tered into a lease ("Lease") with Thrift Drug, Inc. ("Thrift"). The Lease, which covered a term b egin n in g March 2, 1994, and ending April 1, 2004, included two renewal periods which were to
run from April 1, 2004 to April 1, 2009, and from April 1, 2009 to April 1, 2014. The renewals w ere automatic, meaning that the Lease continued in force unless the tenant provided notice of in ten t not to renew at least six months prior to expiration of the then current term. In late 1997 or early 1998, the assets and liabilities of Thrift were acquired by NCS and, on Jan u ary 20, 1998, Thrift assigned its tenancy under the Lease to NCS, a wholly-owned subsidiary o f NCS Healthcare, Inc. In January 2003, Omnicare acquired NCS Healthcare, Inc., and, acco rd in g to Greenwood, became the de facto assignee of the Lease. (Doc. 3 at ¶ 20(j)). G reen w o o d alleges that the Defendants "refused to make payments for rent due under the lease after April 1, 2009." (Id. at ¶ 24(c)). A lth o u gh the Amended Complaint seeks damages for non-payment of rent, real estate tax es, and insurance fees, the arguments underlying the Motion to Dismiss turn primarily on the co n d itio n of the property at the time the Defendants' ceased paying rent. Greenwood alleges that th e Defendants failed to care for and maintain the property as required by the Lease, thereby cau sin g significant damage to the premises. (Doc. 3 at ¶ 20(j),(c),(f),(g)).1 According to
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T h e portion of the Lease allocating responsibility for maintenance and repairs reads: Lan d lo rd shall be responsible for and keep in good and tenantable co n d itio n , and in good order and repair (i) appurtenances thereto, (ii) all structural arts thereof, both exterior and interior, including but n o t limited to floor slabs, walls and roofs, and all repairs thereto n ecessary to make same watertight, (iii) all concealed water, sewer, gas, electric and other utility lines and all sprinkler systems, if any, an d (iv) all mechanical equipment, including but not limited to, the h ead in g and air-conditioning systems and any elevators. Landlord's o b ligatio n s under this article shall not extend to such repairs which are necessary as a direct result of the negligent acts or omissions of T en an t, its agents, invitees, contractors, employees, or servants, to th e extent not covered by casualty insurance carried by Landlord or req u ired to be carried by Landlord pursuant to this lease.
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Greenwood, these damages, totaling at least $430,108.56, "were caused or allowed knowingly, in ten tio n ally and in wanton disregard for the health and property of others." (Id. at ¶¶ 26, 29(c)). B. S ta n d a rd of Review
In ruling on a Motion to Dismiss made pursuant to Fed. R. Civ. P. 12(b)(6), the Court m u st accept the allegations in the complaint as true and view reasonable inferences in the light m o st favorable to the plaintiff. See Erickson v. Pardus, 551 U.S. 89, 95 (2007). A complaint d o es not satisfy the requirements of Rule 12(b)(6) if it fails to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007) (m o d ifyin g longstanding 12(b)(6) standard set out in Conley v. Gibson, 355 U.S. 41 (1957)). See also Ashcroft v. Iqbal, 556 U.S. ----, 129 S.Ct. 1937 (2009) (clarifying that Twombly standard not lim ited to antitrust context). To survive a motion made pursuant to Fed. R. Civ. P. 12(b)(6), a plaintiff must "make a `sh o w in g' rather than a blanket assertion of an entitlement to relief." Phillips v. County of A llegh en y, 515 F.3d 224, 231 (3d Cir.2008). In other words, he must supply "enough facts to raise a reasonable expectation that discovery" will reveal evidence supporting his claim. Id. at 232 (q u o tin g Twombly, 550 U.S. at 556 n.3). The United States Court of Appeals for the Third Circuit h as instructed: [A ]fter Iqbal, when presented with a motion to dismiss for failure to state a claim, district courts should conduct a two-part analysis. F irst, the factual and legal elements of a claim should be separated. T h e District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a
(D o c. 3 at ¶ 13). The Lease also placed upon the tenant "responsib[ility] for rep airin g, resealing and/or replacing the parking areas and sidewalks when needed." (Id. at ¶ 14).
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District Court must then determine whether the facts alleged in the co m p lain t are sufficient to show that the plaintiff has a "plausible claim for relief." In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to "show" su ch an entitlement with its facts.
F o w ler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). Where the court is unable to in fer more than a possibility of misconduct, the complaint does not "show" that the pleader is entitled to relief. C. D is c u s s i o n 1. T h e Negligence Claim and the "Gist of the Action Doctrine"
T h e gist of the action doctrine serves "to maintain the conceptual distinction between b reach of contract claims and tort claims" by preventing a plaintiff from attempting to cast what is really a breach of contract claim as a tort claim. eToll, Inc. v. Elias/Savion Adver., Inc., 811 A.2d 1 0 , 14 (Pa. Super. 2002). Pennsylvania courts have differentiated contract from tort claims as fo llo w s: "Tort actions lie for breaches of duties imposed by law as a matter of social policy, while co n tract actions lie only for breaches of duties imposed by mutual consensus agreements between p articu lar individuals." Bash v. Bell Tele. Co. of Pennsylvania., 601 A.2d 825, 829 (Pa. S u p e r .1 9 9 2 ) . 2 T h e gist of the action "doctrine bars tort claims: (1) arising solely from a contract between th e parties; (2) where the duties allegedly breached were created and grounded in the contract
A lth o u g h the Pennsylvania Supreme Court has yet to adopt the doctrine, it has been applied re g u la rly by the Pennsylvania Superior Court. See, e.g., Pittsburgh Constr. Co. v. Griffith, 834 A.2d 572, 5 7 7 (Pa. Super. 2003). The Court of Appeals for the Third Circuit has also relied on the doctrine in a p p lyin g Pennsylvania law. See Bohler-Uddeholm America, Inc. v. Ellwood Group., Inc., 247 F.3d 79, 1 0 3 -0 4 (3d Cir. 2001).
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itself; (3) where the liability stems from a contract; or (4) where the tort claim essentially d u p licates a breach of contract claim or the success of which is wholly dependent on the terms of a co n tract." Wilmington Trust Co. v. County of Allegheny, 640 F. Supp.2d 643, 648 (W.D. Pa. 2 0 0 9 ) (citing eToll, 811 A.2d at 19). T o determine whether the doctrine applies, the Court must assess whether the duties alleged to have been breached are intertwined with or merely collateral to obligations under the contract. Id. (citing Sunquest Info. Sys., Inc. v. Dean Witter Reynolds, Inc., 40 F. Supp.2d 644, 651 (W.D. P a.1 9 9 9 )). Despite Greenwood's vigorous and creative arguments to the contrary, the Court finds th at Count II of the Complaint, which alleges negligence on the part of the Defendants, is in d isp u tab ly grounded in the Lease agreement, and should, therefore, be dismissed. The Plaintiff first seeks to avoid application of the gist of the action doctrine by arguing th at consideration of the doctrine is premature. In support of this argument, Greenwood notes that " co u rts have been reluctant to apply the gist of the action doctrine to dismiss tort claims where the ex isten ce of a contract is still in question." M.H. Rydek Elec., LLC v. Zober Indus., No. 07-3885, 2 0 0 7 WL 3407130, at * 2 ( E.D. Pa. Nov. 15, 2007) (collecting cases). Here, however, NCS ad m its unequivocally that it was a successor to the original lessee, Thrift, and that it was bound by th e terms of Thrift's lease with Greenwood. (Doc. 43 at 9).3 As to NCS, application of the doctrine is not premature.4
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"W h e n a [party] alleges a fact in a court of justice, for [its] advantage, [it] shall not be allowed to c o n tra d ic t it afterwards." Tops Apparel Mfg. Co. v. Rothman, 244 A.2d 436, 439 n.8 (Pa. 1968) (quoted in T o le d o Mack Sales & Serv., Inc., v. Mack Trucks, Inc., 530 F.3d 204, 229 n.18 (3d Cir. 2008)). T h e prematurity argument is also insufficient to overcome dismissal of the negligence claims lo d g e d against Omnicare. Even if the Court were to assume for purposes of the pending Motion that O m n ic a re was bound by the terms of the Lease, the negligence claims against it would, as the discussion w ith respect to NCS, infra, demonstrates, be barred by the gist of the action doctrine. Moreover, G re e n w o o d has not set out sufficient facts to state a plausible claim that Omnicare owed it a duty separate
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Greenwood next argues that NCS's concession that it was the assignee of Greenwood's lease with Thrift does not preclude Greenwood from asserting negligence claims against NCS. Greenwood cites Pennsylvania case law for the proposition that the gist of the action applies only w h ere "the complained-of conduct [finds] no substantial basis in the law of torts." (Doc. 45 at 7) (italics and underlining in original). According to Greenwood, its claims for destruction of the leased building and premises "find ample support in the law of tort and do not arise solely from co n tract term [sic]." (Id. at 8). Greenwood directs the Court's attention to Reitmeyer v. Sprecher, 2 4 3 A.2d 395 (Pa.1968). T h e Pennsylvania Supreme Court decision in Reitmeyer rejected the continued viability of a decades-old principle of Pennsylvania landlord-tenant law in favor of the approach articulated in th e Restatement (Second) of Torts. In doing so, it repudiated its prior holding in Harris v. Lew isto w n Trust Co., 191 A. 34 (Pa.1937), that a landlord's promise to repair, made during and fo llo w in g negotiation of a lease, could not support a tort claim against the landlord for failu re to repair. Citing section 357 of the Restatement (Second) of Torts, which discusses a lan d lo rd 's liability in tort for personal injury incurred on leased premises, the Court in Reitmeyer fo u n d that given the unequal bargaining position of tenants and landlords, residential leases are not n ego tiated at arm's length. Therefore, where a landlord induces a tenant to execute a lease for o b v io u sly defective premises by promising to make repairs, "a duty on the part of the landlord [arises] to repair and make safe the defective condition of the premises and if, as alleged, physical h arm [is] caused to the tenant by a breach of the landlord's promise to repair," the landlord should b e liable in tort. Reitmeyer, 243 A.2d at 398. "It is not the contract per se which creates the duty; it
a n d apart from any obligation it may have had under the lease. Thus, even in the absence of any contractual o b lig a tio n , the negligence claim against Omnicare cannot survive.
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is the law which imposes the duty because of the nature of the undertaking in the contract." Id. (q u o tin g Evans v. Otis Elev. Co., 168 A.2d 573, 575 ( Pa.1961)). Greenwood also cites a second case, Reed v. Dupuis, 920 A. 2d 861, 867 (Pa. Super. 2007), which, like Reitmeyer, turns on a residential landlord's duty to his tenant. There, the Plaintiff filed a single count complaint alleging that her landlord was negligent in failing to correct a water d am age to the leased premises. The complaint alleged that the landlord had knowledge of the co n d itio n , the condition created an unreasonable risk, and that the landlord promised to remedy the co n d itio n , but did not use reasonable care in doing so. Id. at 866. In response, the landlord raised th e gist of the action doctrine, arguing that an exculpatory clause in the lease barred the negligence c l a im . T h e Court in Reed rejected application of the doctrine, citing section 323 of the Restatement (S eco n d ) of Torts and section 17.6 of the Restatement (Second) of Property. "These sections, sim ilar to section 357 of the Restatement (Second) of Torts, imposed on a landlord an independent legal duty to exercise reasonable care when he/she undertakes to render services for a tenant and rep air[s] known dangerous conditions on the leased premises." Id. at 867. Despite Greenwood's attempt to force this matter into the framework of the gist of the action an alysis in Reitmeyer and Reed, it does not fit. Those cases, unlike this one, dealt with extraco n tractu al duties imposed upon residential landlords, who are deemed to have a "special relatio n sh ip " with their lessees. The sections of the Restatements in which those duties are gro u n d ed do not have any arguable application to the maintenance obligations of a commercial ten an t. The distinction between Reitmeyer and Reed and this case is illustrated by the Court's reaso n in g in 2401 Walnut, L.P. v. Am. Express Travel Related Serv. Co., Civ. No. 07-1281, 2009 W L 398727 (E.D. Pa. Feb. 18, 2009).
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There, the Defendant was alleged to have left leased premises in unsatisfactory condition. Responding to a two count complaint alleging breach of contract and negligence, the Defendant " argu e[d ] that plaintiff's negligence count was essentially duplicative of its breach of the lease count an d [was] therefore barred under [the] `gist of the action' . . . doctrine[ ]." Id. at * 3. Noting that " th e . . . doctrine is to be applied with circumspection in a landlord-tenant context," the Court d istin gu ish ed commercial from residential lease agreements. "[I]n the context of a residential lease d isp u te, one must consider whether application of the gist-of-the-action doctrine would dilute the p ro tectio n s afforded to the tenant under the state's common law." Id. at 5. In contrast, evaluation o f the obligations of a commercial tenant under a lease negotiated in an arms-length transaction, " w h ere no `special relationship' exists," turns on whether the "plaintiff's negligence claim is su fficien tly distinct from [the] breach-of-the-lease claim as to be capable of being independently p u rsu ed ." Id. at 6. The Court, in an analysis which is equally applicable to Greenwood's argu m en ts, observed that the tenant's obligation under the lease to keep the premises in good order w as a duty: " [C ]reated by the larger social obligations embodied in the law of to rts." See, e.g., U.S. Gypsum Co. v. Schiavo Bros., Inc., 668 F.2d 1 7 2 ,1 7 4 (3d Cir.1981) ("The obligation of a tenant to return the leaseh o ld property in the condition in which it was received, reaso n ab le wear and tear excepted, is fundamental to the lan d lo rd -ten an t relationship, even in a commercial setting.") (ap p lyin g Pennsylvania law). The legal duty is not, however, one th a t is "separate and distinct" from the duties that defendant a ssu m ed under the lease. [The lease] terms subtly expound upon a ten an t's duty under common law "to return the leasehold property in th e condition in which it was received, reasonable wear and tear ex cep ted ." [M]odifications to the leaseholder's common law duty to rep air are, of course, the parties' prerogative to bargain for. See R estatem en t (Second) Property: Landlord and Tenant § 12.2 cmt. l. (" T h e obligations assumed by the tenant . . . to keep the leased p ro p erty in repair depend, of course, on the intention of the parties as manifested by the language [expressing] the promise.").
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Accordingly, [the] complaint alleges that defendant violated legal d u ties that derive from specific provisions of the commercial lease. A p p licatio n of the gist-of-the-action doctrine in this context, where th e lease was negotiated between sophisticated parties in an arm s-len gth transaction, would not cause the tenant's obligation to rep air to "be rendered meaningless" and would not cause " u n d erlyin g social policies" not to be given effect. Reed, 920 A.2d at 867. 2 4 0 1 Walnut, 2009 WL 398727, at * 6 (some internal citations omitted) (emphasis added). The C o u rt thus concluded that the gist of the action doctrine barred the plaintiff's negligence claim. G reen w o o d has failed to convince the Court that a different result should obtain here.5 A lth o u gh Greenwood claims that NCS intentionally and negligently breached its contract w ith plaintiffs, the bottom line is that "it does not matter in what manner defendants committed the alleged breach; it is still simply a breach of contract, and the gist of plaintiff['s] action in this case clearly sounds in contract." McShane v. Recordex Acquisition Corp., No. 01117 Feb. Term 2003, 0 7 0 5 7 6 , 2003 WL 22805233, at *4 (Pa. Com. Pl. Nov. 14, 2003). But for the contract, the D efen d an ts would not have been in lawful possession of the leased premises, and would not have o w ed any duty to the Plaintiff to maintain or repair the property. In these circumstances, the co n tract is inextricably intertwined with the negligence claim, and the negligence claim should be d is m iss e d . 2. T h e Punitive Damages Claim
G re e n w o o d 's citation to Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc., 530 F.3d 204 (3 d Cir. 2008) does not alter the Court's conclusion. There, the Court of Appeals considered whether a c o u n te rc la im for misappropriation of trade secrets could be construed as a claim for breach of a licensing a g re e m e n t. Concluding that it could not, the Court relied on the fact that Mack Trucks, Inc. had
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tak en "several steps independent of issuing a license agreement to insure that its dealers did not [share information with] unauthorized persons." Id. at 229. "Thus, Toledo's duty did not arise sim p ly from its license agreement with Mack, but instead had roots in its independent duty to keep M ack 's trade secrets confidential, and the counterclaim can properly be seen as sounding in tort." Id . The facts of Toledo Mack are simply not analogous to those presented here.
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Under Pennsylvania law there is no independent cause of action for punitive damages. See K irk b rid e v. Lisbon Contractors, Inc., 555 A.2d 800, 802 (Pa.1989) (stating that " [s]ince punitive d am ages are an element of damages arising out of the initial cause of action, if that cause of action is dismissed, the punitive damages [claim] cannot stand"). Equally fundamental is the fact that p u n itiv e damages are not available in actions for breach of contract. See Ash v. Cont'l Ins. Co., 9 3 2 A.2d 877, 881 (Pa. 2007) (observing that "under Pennsylvania law, punitive damages are typ ically only awarded in tort actions"). Because, as the Court has explained, Greenwood has not ad v an ced a viable claim in tort, the claim for punitive damages should be dismissed. III. C O N C L U S IO N F o r the reasons set out above, it is recommended that the Defendants' Motion to Dismiss C o u n ts II and III of the Amended Complaint (Doc. 42) be granted. P u rsu an t to the Magistrate Judges Act, 28 U.S.C. § 636(b)(1)(B) and (C), and Rule 72.D.2 o f the Local Civil Rules, the parties are allowed to file objections in accordance with the schedule estab lish ed in the docket entry reflecting the filing of this Report and Recommendation. Failure to tim ely file objections may constitute a waiver of any appellate rights. Any party opposing o b jectio n s may file their response to the objections in accordance with Local Civil Rule 72.D.2.
R esp ectfu lly submitted,
/s/ Amy Reynolds Hay C h ief United States Magistrate Judge
cc:
C o u n sel of Record via CM-ECF
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IN THE UNITED STATES DISTRICT COURT F O R THE WESTERN DISTRICT OF PENNSYLVANIA
G R E E N W O O D LAND COMPANY, P l a i n t if f v s. OMNICARE, INC.; NCS HEALTHCARE O F NEW YORK, INC., D efen d a n ts
) ) ) ) ) ) ) )
Civil Action No. 09-686 Judge David Stewart Cercone/ Magistrate Judge Amy Reynolds Hay
R E P O R T AND RECOMMENDATION I. RECOMMENDATION
T h e Amended Complaint (Doc. 3) in this diversity matter filed by Greenwood Land C o m p an y ("Greenwood") comprises three counts - the first for breach of a commercial Lease, the seco n d alleging negligence based on failure to maintain and repair the leased premises, and the th ird for punitive damages. The Defendants, Omnicare, Inc. ("Omnicare") and NCS Healthcare of N ew York, Inc. ("NCS"), have filed a Motion to Dismiss Counts II and III of the Amended C o m p lain t, contending that Count II is barred by Pennsylvania's "gist of the action" doctrine, and th at, in the absence of a viable negligence claim, the Count III claim for punitive damages must be d ism issed as well. It is respectfully recommended that the Defendants' Motion (Doc. 42) be g r a n te d . II. REPORT A. B a ck g ro u n d
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In 1994, Greenwood, as landlord of commercial property located in Sharon, Pennsylvania, en tered into a Lease with Thrift Drug, Inc. ("Thrift"). The Lease, which covered a term beginning M arch 2, 1994, and ending April 1, 2004, included two renewal periods which were to run from A p ril 1, 2004 to April 1, 2009, and from April 1, 2009 to April 1, 2014. The renewals were au to m atic, meaning that the Lease continued in force unless the tenant provided notice of intent not to renew at least six months prior to expiration of the then current term. In late 1997 or early 1998, the assets and liabilities of Thrift were acquired by NCS, and, on Jan u ary 20, 1998, Thrift assigned its tenancy under the Lease to NCS, a wholly-owned subsidiary o f NCS Healthcare, Inc. In January 2003, Omnicare acquired NCS Healthcare, Inc., and, acco rd in g to Greenwood, became the de facto assignee of the Lease. (Doc. 3 at ¶ 20(j)). G reen w o o d alleges that the Defendants "refused to make payments for rent due under the lease after April 1, 2009." (Id. at ¶ 24(c)). A lth o u gh the Amended Complaint seeks damages for non-payment of rent, real estate tax es, and insurance fees, the arguments underlying the Motion to Dismiss turn primarily on the co n d itio n of the property at the time the Defendants' ceased paying rent. Greenwood alleges that th e Defendants failed to care for and maintain the property as required by the Lease, thereby cau sin g significant damage to the premises. (Doc. 3 at ¶ 20(j),(c),(f),(g)).6 According to
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T h e portion of the Lease allocating responsibility for maintenance and repairs reads: L a n d lo rd shall be responsible for and keep in good and tenantable c o n d itio n , and in good order and repair (i) appurtenances thereto, (ii) all s tru c tu ra l arts thereof, both exterior and interior, including but not limited to floor slabs, walls and roofs, and all repairs thereto necessary to make s a m e watertight, (iii) all concealed water, sewer, gas, electric and other u tility lines and all sprinkler systems, if any, and (iv) all mechanical e q u ip m e n t, including but not limited to, the heading and air-conditioning
system s and any elevators. Landlord's obligations under this article
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Greenwood, these damages, totaling at least $430,108.56, "were caused or allowed knowingly, in ten tio n ally and in wanton disregard for the health and property of others." (Id. at ¶¶ 26, 29(c)). B. S ta n d a rd of Review In ruling on a Motion to Dismiss made pursuant to Fed. R. Civ. P. 12(b)(6), the Court m u st accept the allegations in the complaint as true and view reasonable inferences in the light m o st favorable to the plaintiff. See Erickson v. Pardus, 551 U.S. 89, 95 (2007). A complaint d o es not satisfy the requirements of Rule 12(b)(6) if it fails to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007) (m o d ifyin g longstanding 12(b)(6) standard set out in Conley v. Gibson, 355 U.S. 41 (1957)). See also Ashcroft v. Iqbal, 556 U.S. ----, 129 S.Ct. 1937 (2009) (clarifying that Twombly standard not lim ited to antitrust context). To survive a motion made pursuant to Fed. R. Civ. P. 12(b)(6), a plaintiff must "make a `sh o w in g' rather than a blanket assertion of an entitlement to relief." Phillips v. County of A llegh en y, 515 F.3d 224, 231 (3d Cir.2008). In other words, he must supply "enough facts to raise a reasonable expectation that discovery" will reveal evidence supporting his claim. Id. at 232 (q u o tin g Twombly, 550 U.S. at 556 n.3). The United States Court of Appeals for the Third Circuit h as instructed:
sh all not extend to such repairs which are necessary as a direct result o f the negligent acts or omissions of Tenant, its agents, invitees,
c o n tra c to rs , employees, or servants, to the extent not covered by casualty in s u ra n c e carried by Landlord or required to be carried by Landlord p u rs u a n t to this lease. (D o c . 3 at ¶ 13). The Lease also placed upon the tenant "responsib[ility] for repairing, re s e a lin g and/or replacing the parking areas and sidewalks when needed." (Id. at ¶ 14).
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[A]fter Iqbal, when presented with a motion to dismiss for failure to state a claim, district courts should conduct a two-part analysis. F irst, the factual and legal elements of a claim should be separated. T h e District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a D istrict Court must then determine whether the facts alleged in the co m p lain t are sufficient to show that the plaintiff has a "plausible claim for relief." In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to "show" su ch an entitlement with its facts.
F o w ler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009). Where the court is unable to in fer more than a possibility of misconduct, the complaint does not "show" that the pleader is entitled to relief. C. D is c u s s io n 1. T h e Negligence Claim and the "Gist of the Action Doctrine"
T h e gist of the action doctrine serves "to maintain the conceptual distinction between b reach of contract claims and tort claims" by preventing a plaintiff from attempting to cast what is really a breach of contract claim as a tort claim. eToll, Inc. v. Elias/Savion Adver., Inc., 811 A.2d 1 0 , 14 (Pa. Super. 2002). Pennsylvania courts have differentiated contract from tort claims as fo llo w s: "Tort actions lie for breaches of duties imposed by law as a matter of social policy, while co n tract actions lie only for breaches of duties imposed by mutual consensus agreements between p articu lar individuals." Bash v. Bell Tele. Co. of Pennsylvania., 601 A.2d 825, 829 (Pa. S u p e r .1 9 9 2 ) . 7
A lth o u g h the Pennsylvania Supreme Court has yet to adopt the doctrine, it has been applied re g u la rly by the Pennsylvania Superior Court. See, e.g., Pittsburgh Constr. Co. v. Griffith, 834 A.2d 572, 5 7 7 (Pa. Super. 2003). The Court of Appeals for the Third Circuit has also relied on the doctrine in a p p lyin g Pennsylvania law. See Bohler-Uddeholm America, Inc. v. Ellwood Group., Inc., 247 F.3d 79, 1 0 3 -0 4 (3d Cir. 2001).
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The gist of the action "doctrine bars tort claims: (1) arising solely from a contract between th e parties; (2) where the duties allegedly breached were created and grounded in the contract itself; (3) where the liability stems from a contract; or (4) where the tort claim essentially d u p licates a breach of contract claim or the success of which is wholly dependent on the terms of a co n tract." Wilmington Trust Co. v. County of Allegheny, 640 F. Supp.2d 643, 648 (W.D. Pa. 2 0 0 9 ) (citing eToll, 811 A.2d at 19). T o determine whether the doctrine applies, the Court must assess whether the duties alleged to have been breached are intertwined with or merely collateral to obligations under the contract. Id. (citing Sunquest Info. Sys., Inc. v. Dean Witter Reynolds, Inc., 40 F. Supp.2d 644, 651 (W.D. P a.1 9 9 9 )). Despite Greenwood's vigorous and creative arguments to the contrary, the Court finds th at Count II of the Complaint, which alleges negligence on the part of the Defendants, is in d isp u tab ly grounded in the Lease agreement, and should, therefore, be dismissed. The Plaintiff first seeks to avoid application of the gist of the action doctrine by arguing th at consideration of the doctrine is premature. In support of this argument, Greenwood notes that " co u rts have been reluctant to apply the gist of the action doctrine to dismiss tort claims where the ex isten ce of a contract is still in question." M.H. Rydek Elec., LLC v. Zober Indus., No. 07-3885, 2 0 0 7 WL 3407130 at * 2 ( E.D. Pa. Nov. 15, 2007) (collecting cases). Here, however, NCS ad m its uniquivocally that it was a successor to the original lessee, Thrift, and that it was bound by th e terms of Thrift's lease with Greenwood. (Doc. 43 at 9).
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As to NCS, application of the
"W h e n a [party] alleges a fact in a court of justice, for [its] advantage, [it] shall not be allowed to c o n tra d ic t it afterwards." Tops Apparel Mfg. Co. v. Rothman, 244 A.2d 436, 439 n.8 (Pa. 1968) (quoted in T o le d o Mack Sales & Serv., Inc., v. Mack Trucks, Inc., 530 F.3d 204, 229 n.18 (3d Cir. 2008)).
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doctrine is not premature.9 G reen w o o d next argues that NCS's concession that it was the assignee of Greenwood's lease with Thrift does not preclude Greenwood from asserting negligence claims against NCS. Greenwood cites Pennsylvania case law for the proposition that the gist of the action applies only w h ere "the complained-of conduct [finds] no substantial basis in the law of torts." (Doc. 45 at 7) (italics and underlining in original). According to Greenwood, its claims for destruction of the leased building and premises "find ample support in the law of tort and do not arise solely from co n tract term [sic]." (Id. at 8). Greenwood directs the Court's attention to Reitmeyer v. Sprecher, 2 4 3 A.2d 395 (Pa.1968). T h e Pennsylvania Supreme Court decision in Reitmeyer rejected the continued viability of a decades-old principle of Pennsylvania landlord-tenant law in favor of the approach articulated in th e Restatement (Second) of Torts. In doing so, it repudiated its prior holding in Harris v. Lew isto w n Trust Co., 191 A. 34 (Pa.1937), that a landlord's promise to repair, made during and fo llo w in g negotiation of a lease, could not support a tort claim against the landlord for failu re to repair. Citing section 357 of the Restatement (Second) of Torts, which discusses a lan d lo rd 's liability in tort for personal injury incurred on leased premises, the Court in Reitmeyer fo u n d that given the unequal bargaining position of tenants and landlords, residential leases are not n ego tiated at arm's length. Therefore, where a landlord induces a tenant to execute a lease for
T h e prematurity argument is also insufficient to overcome dismissal of the negligence claims lo d g e d against Omnicare. Even if the Court were to assume, for purposes of the pending Motion, that O m n ic a re was bound by the terms of the lease, the negligence claims against it would, as the discussion w ith respect to NCS, infra, demonstrates, be barred by the gist of the action doctrine. Moreover, Greenwood h a s not set out sufficient facts to state a plausible claim that Omnicare owed it a duty separate and apart fro m any obligation it may have had under the lease. Thus, even in the absence of any contractual o b lig a tio n , the negligence claim against Omnicare cannot survive.
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obviously defective premises by promising to make repairs, "a duty on the part of the landlord [arises] to repair and make safe the defective condition of the premises and if, as alleged, physical h arm [is] caused to the tenant by a breach of the landlord's promise to repair," the landlord should b e liable in tort. Reitmeyer, 243 A.2d at 398. "It is not the contract per se which creates the duty; it is the law which imposes the duty because of the nature of the undertaking in the contract." Id. (q u o tin g Evans v. Otis Elev. Co., 168 A.2d 573, 575 ( Pa.1961)). Greenwood also cites a second case, Reed v. Dupuis, 920 A. 2d 861, 867 (Pa. Super. 2007), which, like Reitmeyer, turns on a residential landlord's duty to his tenant. There, the Plaintiff filed a single count complaint alleging that her landlord was negligent in failing to correct a water d am age to the leased premises. The complaint alleged that the landlord had knowledge of the co n d itio n , the condition created an unreasonable risk, and that the landlord promised to remedy the co n d itio n , but did not use reasonable care in doing so. Id. at 866. In response, the landlord raised th e gist of the action doctrine, arguing that an exculpatory clause in the lease barred the negligence c l a im . T h e Court in Reed rejected application of the doctrine, citing section 323 of the Restatement (S eco n d ) of Torts and section 17.6 of the Restatement (Second) of Property. "These sections, sim ilar to section 357 of the Restatement (Second) of Torts, imposed on a landlord an independent legal duty to exercise reasonable care when he/she undertakes to render services for a tenant and rep air[s] known dangerous conditions on the leased premises." Id. at 867. Despite Greenwood's attempt to force this matter into the framework of the gist of the action an alysis in Reitmeyer and Reed, it does not fit. Those cases, unlike this one, dealt with extraco n tractu al duties imposed upon residential landlords, who are deemed to have a "special relatio n sh ip " with their lessees. The sections of the Restatements in which those duties are
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grounded do not have any arguable application to the maintenance obligations of a commercial ten an t. The distinction between Reitmeyer and Reed and this case is illustrated by the Court's reaso n in g in 2401 Walnut, L.P. v. Am. Express Travel Related Serv. Co., Civ. No. 07-1281, 2009 W L 398727 (E.D. Pa. Feb. 18, 2009). T h ere, the Defendant was alleged to have left leased premises in unsatisfactory condition. Responding to a two count complaint alleging breach of contract and negligence, the Defendant " argu e[d ] that plaintiff's negligence count was essentially duplicative of its breach of the lease count an d [was] therefore barred under [the] `gist of the action' . . . doctrine[ ]." Id. at * 3. Noting that " th e . . . doctrine is to be applied with circumspection in a landlord-tenant context," the Court d istin gu ish ed commercial from residential lease agreements. "[I]n the context of a residential lease d isp u te, one must consider whether application of the gist-of-the-action doctrine would dilute the p ro tectio n s afforded to the tenant under the state's common law." Id. at 5. In contrast, evaluation of th e obligations of a commercial tenant under a lease negotiated in an arms-length transaction, " w h ere no `special relationship' exists," turns on whether the "plaintiff's negligence claim is su fficien tly distinct from [the] breach-of-the-lease claim as to be capable of being independently p u rsu ed ." Id. at 6. The Court, in an analysis which is equally applicable to Greenwood's arguments, o b serv ed that the tenant's obligation under to lease to keep the premises in good order was a duty: " [C ]reated by the larger social obligations embodied in the law of to rts." See, e.g., U.S. Gypsum Co. v. Schiavo Bros., Inc., 668 F.2d 1 7 2 ,1 7 4 (3d Cir.1981) ("The obligation of a tenant to return the leaseh o ld property in the condition in which it was received, reaso n ab le wear and tear excepted, is fundamental to the lan d lo rd -ten an t relationship, even in a commercial setting.") (ap p lyin g Pennsylvania law). The legal duty is not, however, one th a t is "separate and distinct" from the duties that defendant a ssu m ed under the lease. [The lease] terms subtly expound upon a ten an t's duty under common law "to return the leasehold property in th e condition in which it was received, reasonable wear and tear
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excepted." [M]odifications to the leaseholder's common law duty to rep air are, of course, the parties' prerogative to bargain for. See R estatem en t (Second) Property: Landlord and Tenant § 12.2 cmt. l. (" T h e obligations assumed by the tenant . . . to keep the leased p ro p erty in repair depend, of course, on the intention of the parties as manifested by the language [expressing] the promise."). A cco rd in gly, [the] complaint alleges that defendant violated legal d u ties that derive from specific provisions of the commercial lease. A p p licatio n of the gist-of-the-action doctrine in this context, where th e lease was negotiated between sophisticated parties in an arm s-len gth transaction, would not cause the tenant's obligation to rep air to "be rendered meaningless" and would not cause " u n d erlyin g social policies" not to be given effect. Reed, 920 A.2d at 867. 2 4 0 1 Walnut, 2009 WL 398727 at * 6 (some internal citations omitted) (emphasis added). The C o u rt thus concluded that the gist of the action doctrine barred the plaintiff's negligence claim. G reen w o o d has failed to convince the Court that a different result should obtain here. 10 A lth o u gh Greenwood claims that NCS intentionally and negligently breached its contract w ith plaintiffs, the bottom line is that "it does not matter in what manner defendants committed the alleged breach; it is still simply a breach of contract, and the gist of plaintiff['s] action in this case clearly sounds in contract." McShane v. Recordex Acquisition Corp., No. 01117 Feb. Term 2003, 0 7 0 5 7 6 , 2003 WL 22805233 at *4 (Pa. Com. Pl. Nov. 14, 2003). But for the contract, the D efen d an ts would not have been in lawful possession of the leased premises, and would not have o w ed any duty to the Plaintiff to maintain or repair the property. In these circumstances, the
G re e n w o o d 's citation to Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc., 530 F.3d 204 (3 d Cir. 2008) does not alter the Court's conclusion. There, the Court of Appeals considered whether a c o u n te rc la im for misappropriation of trade secrets could be construed as a claim for breach of a licensing a g re e m e n t. Concluding that it could not, the Court relied on the fact that Mack Trucks, Inc. had ta k e n " s e v e ra l steps independent of issuing a license agreement to insure that its dealers did not [share information with] unauthorized persons." Id. at 229. "Thus, Toledo's duty did not arise simply from its license agreement with Mack, but instead had roots in its independent duty to keep Mack's trade secrets c o n fid e n tia l, and the counterclaim can properly be seen as sounding in tort." Id. The facts of Toledo Mack a re simply not analogous to those presented here.
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contract is inextricably intertwined with the negligence claim, and the negligence claim should be d is m iss e d . 2. T h e Punitive Damages Claim
U n d er Pennsylvania law there is no independent cause of action for punitive damages, see K irk b rid e v. Lisbon Contractors, Inc., 555 A.2d 800, 802 (Pa.1989) (stating that " [s]ince punitive d am ages are an element of damages arising out of the initial cause of action, if that cause of action is dismissed, the punitive damages [claim] cannot stand"). Equally fundamental is the fact that p u n itiv e damages are not available in actions for breach of contract. See Ash v. Cont'l Ins. Co., 9 3 2 A.2d 877, 881 (Pa. 2007) (observing that "under Pennsylvania law, punitive damages are typ ically only awarded in tort actions"). Because, as the Court has explained, Greenwood has not ad v an ced a viable claim in tort, the claim for punitive damages should be dismissed. III. CONCLUSION F o r the reasons set out above, it is recommended that the Defendants' Motion to Dismiss C o u n ts II and III of the Amended Complaint (Doc. 42) be granted. P u rsu an t to the Magistrate Judges Act, 28 U.S.C. § 636(b)(1)(B) and (C), and Rule 72.D.2 o f the Local Civil Rules, the parties are allowed to file objections in accordance with the schedule estab lish ed in the docket entry reflecting the filing of this Report and Recommendation. Failure to tim ely file objections may constitute a waiver of any appellate rights. Any party opposing o b jectio n s may file their response to the objections in accordance with Local Civil Rule 72.D.2.
R esp ectfu lly submitted, /s/ Amy Reynolds Hay C h ief United States Magistrate Judge
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Dated: 22 February, 2010 cc: H o n . David Stewart Cercone U n ited States District Judge C o u n sel of Record via CM-ECF
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